Paying off your mortgage early can save you money on interest over time. It will also allow you to eliminate a big monthly payment which will give you a lot more freedom once you get rid of that expense.
This can be a challenge though, especially since a mortgage is a big debt. But there are a few things you can do to get your mortgage balance down to $ 0 faster. Here are three.
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1. Make bi-weekly payments
One of the easiest ways to pay off your mortgage faster is to make bi-weekly payments. You see, mortgage payments are due once a month, but a lot of people get paychecks every two weeks. Instead of making a single monthly mortgage payment, you can split your payment in half and pay that amount each payday.
This technique works because if you get paid twice a month, you receive 26 paychecks per year. So if you pay your mortgage on every check, you’ll end up making 13 payments a year, instead of the 12 you would if you only paid your loan once a month. That extra mortgage payment you make each year will reduce your loan balance and reduce your repayment schedule.
Some lenders have programs that let you make bi-weekly payments, so see if yours does. Otherwise, you will likely need to transfer the money to a bank account each payday, then make one regular monthly payment, but include the extra money. This is because your lender may not accept two payments per month if they are not configured for it.
2. Put windfall profits on your mortgage
Another great way to pay off your mortgage early is to make an extra payment on the principal (the original amount of your loan) if you get your hands on money that you haven’t spent on anything else. For example, you can use a tax refund, a government stimulus check, cash gifts you receive for your birthday, or a bonus from your job.
When you make these lump sum payments in addition to your regular mortgage payment, you can use the entire amount to pay off your loan balance. (No money needs to be turned into interest, unlike your regular monthly payments.) This can dramatically speed up the time it takes to pay off your debt, especially if you make regular lump sum payments.
Finally, you can choose to increase each mortgage payment you make by a set amount, such as paying an additional $ 100 or $ 200 with each payment you make. Again, this extra money can be used to reduce principal to speed up your repayment schedule.
The best approach for you will depend on your goals, how often you get paid, and what your mortgage lender allows. And if you really want to pay off your mortgage as soon as possible, then you can decide to use these three techniques.
By paying twice a month, adding a small amount to each payment, or making an additional lump sum payment whenever you can, you should be able to pay off your loan much sooner than expected and send much less money. interest to your lender. time.